San Diego Set to Sue SeaWorld for $12 Million in Back Rent as Park Rakes in Record Revenue

The bickering between landlord and tenant is getting very intense over the back rent the landlord says it’s owed. Normally, this wouldn’t raise an eyebrow, but the landlord is your city and the tenant is the multi-billionaire dollar theme park on public land called SeaWorld.

This bickering has gone on for two years but on Monday, May 15, your city council gave the city attorney the authorization to take SeaWorld to court to get the $10 million in rent and another $2 million in penalties and interest.

And when he heard that SeaWorld hadn’t paid its back rent, the president of your city council, Sean Elo-Rivera, got mad, real mad. Lori Weisberg at the U-T reported:

Just a little over a week ago, Elo-Rivera asked city officials during a budget hearing if SeaWorld had yet paid the back rent. When advised that no payment had been made, he grew angry, stating that the park’s position was unacceptable. SeaWorld, he said, should feel “ashamed” for not writing a check to the city.

“It’s been bothering me for a long time, and now we’re two years into this,” he said. “I want that money now, I want it yesterday, I want it with interest. I’m getting more and more mad as I think about it because of all the things that it could be used for instead of stacking (it) on top of the other stacks of cash SeaWorld has.”

He added late Monday that he was “glad the city has drawn a line in the sand and is demanding SeaWorld pay us what they owe us.”

These renewed demands from your city council and threats of legal action come at a time when SeaWorld San Diego and its parent are enjoying record revenues. Weisberg:

SeaWorld Entertainment last week released its earnings for the first quarter of 2023 and, as it has for the last several quarters, reported record revenue, rebounding strongly from the pandemic. Revenue, it said, was a record $293.3 million, up 8.4 percent compared with the first quarter of 2022, and 33 percent higher than the same quarter in 2019, before the pandemic.

City Attorney Mara Elliott is also mad. Her office released a statement which announced that the council in closed session had given it authorization to pursue litigation against the theme park. The statement added:

“Although SeaWorld’s public disclosures show it to be in good financial shape despite the pandemic, it refuses to pay back rent on its Mission Bay leasehold. It is the only City lessee to use state-mandated closures during COVID as a pretext to withhold rent. SeaWorld seems to believe that San Diego taxpayers should absorb its debts and liabilities, even though it has banked enormous profits for decades from its operations on prime City-owned real estate.

“SeaWorld’s greed and arrogance are offensive, and the City will hold it accountable.”

SeaWorld should be ashamed and its very greedy and arrogant, our city leaders say. Two years ago city officials warned the park it was in default on its lease payments for most of 2020 and some from 2021. SeaWorld was also advised by the city that it owed the money after a formal audit the city treasurer conducted confirming that more than $9.7 million in back rent is owed, plus nearly $12,000 to cover the cost of the audit. And multiple demands over the last two years have failed to persuade SeaWorld to pay up.

What does SeaWorld say? On this latest development, there was no comment from them. Weisberg reports:

When the Union-Tribune requested a comment from the theme park last year about its decision to not pay the rent that the city said is due, it issued a written statement saying,

“Our position remains unchanged, the City of San Diego has been a great partner of ours over the years and we continue to work with them in an attempt to resolve this issue.” …

SeaWorld had previously rebuffed repeated offers of a rent deferral plan that had been made available to all city tenants.

The park had argued that early on in the pandemic when theme parks had to shut down completely that it was not required to make its minimum rent payments while there were mandated closures.

City officials, however, disagreed, explaining that there was nothing in the lease, the law or state and city emergency orders to justify that conclusion. Rents could be deferred, but not waived, the city said. …

SeaWorld company officials have said little publicly about their resistance to paying the back rent, but early on they told the city that while the San Diego theme park was shuttered for months and collecting no revenue, they still had a large collection of animals to care for, animal rescues to perform and rides it had to operate periodically to ensure they were in working order, San Diego’s then Chief Operating Officer Jay Goldstone said last year.

The city, however, concluded that SeaWorld was no more financially burdened by the pandemic than most of its other lessees and continued to demand that the park pay up.

Recall, that SeaWorld sits on your public land along Mission Bay. And Weisberg reminds us …:

Many city leases, like SeaWorld’s, are structured so that San Diego shares in the revenue its tenants collect. SeaWorld’s rent for its 190-acre site is calculated on the basis of a specified percentage of the park’s gross income from admissions and in-park spending or, alternatively, a minimum yearly rent, whichever is larger. Given that the park was closed for many months, there was no revenue coming in, and even later when it did reopen, it took a while for attendance and spending to come back.

As a result, minimum rent was due, the city informed SeaWorld. As of last year, SeaWorld’s minimum rent was $10.4 million for a full year, plus a 3 percent surcharge.

SeaWorld’s parent company suffered through “another record year in 2022″ the CEO of SeaWorld Entertainment stated in its 2022 annual report. The report to the Securities and Exchange Commission claimed that gross income from San Diego was “significantly impacted” during 2020 due to “the temporary park closures, limited reopenings, modified operations and capacity restrictions resulting from the impact of the COVID-19 pandemic and related government restrictions in San Diego.”

Because of all this, the company says it continues to defer $8.3 million in minimum rent for the year 2020.

During all of this of course are the daily ads from SeaWorld about their upcoming Memorial Day ticket discounts and the nightly firework displays the park shoots off over its animals and the rest of Mission Bay and the surrounding neighborhoods.